Gold price drops to nearly seven week lows, weighed down by stronger USD

London (Oct 2)  Gold remained under some selling pressure on Monday and slipped to its lowest level in nearly seven weeks during early European session.

Currently trading around $1273-74 area, the precious metal continues to be weighed down by the prevalent bullish sentiment surrounding the US Dollar. A stronger greenback tends to drive flows away from dollar-denominated commodities - like gold.

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Adding to this, growing expectations for a Fed rate hike move in December further added to pressure and collaborated to the non-yielding yellow metal's slide to its lowest level since mid-August.

Meanwhile, the market seems to have largely ignored the latest political development in Spain, with persistent USD buying interest turning out to be an exclusive driver of commodity's fall at the start of a new week/month/quarter.

On the positioning front, speculators trimmed bullish net positions in the Gold futures for the second straight week that ended on September 26th. The non-commercial futures contracts of Gold futures dropped by -23,495 contracts to a net position of 212,594 contracts, while the commercial traders positions registered a weekly gain of 9,570 contracts.

Technical levels to watch

Immediate support is now pegged near $1270 level, below which the commodity is likely to accelerate the slide towards $1260 area with some intermediate support near the $1266-65 region.

On the upside, any recovery move back above $1275 level now seems to confront fresh supply near $1280 level, which is closely followed by an important horizontal resistance near $1283-84 area.

FXstreet